Bailout Program Schäuble Preparing for Greek Aid Without IMF

Germany's finance minister is reportedly preparing plans to continue Greece's bailout program without the International Monetary Fund, which could mean new negotiations and parliamentary approval before this autumn's elections. His ministry denied the report.
German Finance Minister Wolfgang Schäuble is reportedly preparing for a Greek bailout program without the IMF.

The German government is making contingency plans for a third bailout for Greece without the participation of the International Monetary Fund (IMF), Handelsblatt has confirmed.

Germany’s Bild newspaper originally broke the story.

According to Handelsblatt’s government sources, an IMF withdrawal would end the current bailout program. A new rescue program would then have to be negotiated from scratch, the sources said.

In this scenario, the European Stability Mechanism, the euro-zone bailout fund, would have to step in and pick up the IMF’s tab, the sources said.

The behind-the-scenes contingency planning casts doubt on Finance Minister Wolfgang Schäuble’s repeated reassurances that the IMF will participate in another bailout for Greece.

A spokeswoman from Mr. Schäuble's finance ministry contradicted the original Bild report in the morning.

"We continue to expect the participation of the IMF," she said, adding: "This participation has been promised and is essential for us."

An IMF withdrawal would represent a radical break with the past bailouts to heavily-indebted Greece.

Mr. Schäuble, Germany and other euro-zone countries have so far insisted on the IMF's involvement in bailout programs given to Greece since 2011, totaling hundreds of billions of euros.

They have viewed the Washington-based organization as a politically-independent body that would guarantee fiscal discipline.

Until recently, Mr. Schäuble had publicly said he is absolutely not willing to proceed without the IMF and even seemed to ease his stance on debt relief to keep the IMF involved in the bailout.

During negotiations for the third bailout in 2015, Germany demanded the IMF’s participation as a precondition in order to convince its skeptical parliament to approve new aid.

Yet the finance ministry has been softening its stance in recent weeks. In an interview with the daily Süddeutsche Zeitung last week, Mr. Schäuble spoke of Europe figuring out its "own solution" within the euro-zone if the IMF decided to pull out.

Since the first Greek bailout in 2011, the Mediterranean country's financial troubles have only grown as its debt pile is currently worth more than 180 percent of Greece's economic output.

 

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The IMF regards Greece's debt level as unsustainable and wants the euro-zone states to offer Athens debt relief, but Germany and some other countries of the 19-nation euro zone strongly oppose a debt haircut, which would mean the other 18 countries pay part of Greece's debt, foregoing repayment.

The majority of the country's debt is now held by E.U institutions and the other 18 euro-zone members.

Spending taxpayer money to bail out Greece is unpopular, especially during an election year. Germany, France and the Netherlands will hold general elections this year.

Mr. Schäuble has repeatedly said the absence of the IMF would mean major changes to the bailout program and would need renewed approval from Germany's lower house of parliament, the Bundestag, which will hold elections this autumn.

According to Bild, the Bundestag could vote on the subject before the elections, which also decide which party names the chancellor, take place.

Mr. Schäuble’s center-right Christian Democrats have threatened to block additional assistance for Athens if the IMF ends its engagement.

On Tuesday, Greece's government said it would welcome a decision by the IMF to pull out of the country's bailout program, news agency Associated Press reported.

Government spokesman Dimitris Tzanakopoulos blamed the Washington-based fund for "pointless delays" in the negotiations.